You Can Erase Debt on a Limited Income
Jim Mielke
This time of year is especially difficult for people on a limited income. People are expected to spend more money than they are used to and it often leads to tough personal financial conditions. Regardless of your income level, you can beat debt and learn the skills required to attain financial freedom. However, you have to learn how to manage debt before you can put yourself on the path to financial freedom.
Change your spending habits first
Getting yourself out of debt is difficult enough when you have good spending habits. You will never get out of debt unless you stop creating new debts. It may sound like common sense, but people too often lose sight of how each coffee, lunch, or other small expense adds up over the course of a statement cycle. You have to stop the bleeding.
Find out how much you actually owe
Before making a plan to eliminate your debt, you have to know exactly how much debt you are in. We are not just talking about credit card debt here. You should know how much you owe debt collectors, medical bills, student loans, and anything else you can think of.
Create a budget
Jot down all of your monthly expenses such as your rent/mortgage, car payment, student loan payment, utilities, minimum credit card payments, etc. Get a total and put that number next to your monthly income. How does it look? Your monthly debts should not exceed 50% of your monthly income.
If your debts are higher than 50% of your monthly income, it may be a good idea to explore debt counseling, consolidation, settlement, or even bankruptcy. These might sound like scary alternatives, but they are actually tools to help you get out of debt.
Is your debt-to-income ratio borderline?
Say you put your income amount next to your debt and your debt is 55%-60% of your monthly income; this does not mean you cannot pay it down the old fashion way. If you can reduce spending for 1-3 months, you could knock out enough debt to take that debt percentage south of 50%. Stay home and make meals instead of going out. Don’t buy clothes for a few months. Pause your kid’s allowance if you have to. We are looking at the long game here.
Do not do these things
Do not explore payday loans, check-in-to-cash options, or personal loans from a small lender. Over 70% of payday loans are rolled over into new loans because the borrower cannot pay enough. These loans are loaded with fees, impossible payment schedules, and interest of up to 500%. Getting stuck in one of these loans can ruin you financially and take years to resolve.
Are you already stuck in a predatory personal loan? Unfortunately, this happens all too often and can have a negative impact on your financial life for years to come. If you are stuck in financial ruin and you are being harassed by predatory lenders, you need help. The South Florida Debt Relief and Education Foundation was created to help people just like you. Contact us for a free consultation today.
